COVID-19: What will happen to physician income this year?

In recent weeks, physicians have gotten the first hints of how much income they could lose in the COVID-19 crisis.

“At a combined system and hospital board meeting yesterday, there was a financial presentation,” said a cardiologist in Minnesota, who declined to be named. “We have ‘salary support’ through May 16, which means we will be receiving base pay at our 2019 level. After May 16, I think it’s fairly certain salaries will be decreased.”

A general internist in the same area added: “The system has decided to pay physicians and other employees for 8 weeks, until May 15, and they are borrowing about $150 million to do this. We don’t know what will happen after May 15, but we are supposed to have an update in early May.”

The worst may be yet to come

Of all the categories of physicians, “I am worried about private practices the most,” said Travis Singleton, senior vice president at Merritt Hawkins, a physician search firm. “They don’t have a financial cushion, and will start seeing big drops in revenue at the end of May.”

“A lot of the A/R [accounts receivables] for practices come within 30 days, and very little comes in after 90 days,” said Terrence R. McWilliams, MD, chief clinical consultant at HSG Advisors, a consultancy for not-for-profit hospitals and their employed physician networks around the country. “So private practices are reaching the point where prior A/R will start to dwindle and they will start feeling the decline in new claims submissions.”

Large practices may have a bigger financial cushion, but in many cases, they also have more liabilities. “We don’t know the financial loss yet, but I think it’s been devastating,” said Paul M. Yonover, MD, a urologist at UroPartners, a large single-specialty practice in Chicago with 62 urologists. “In fact, the financial loss may well be larger than our loss in volume, because we have to support our own surgery center, pathology lab, radiation center, and other in-house services.”

Employed physicians in limbo

In contrast to physicians in private practices, many employed physicians at hospitals and health systems have been shielded from the impact of COVID-19 – at least for now.

“The experiences of employed physicians are very mixed,” said Mr. Singleton at Merritt Hawkins. “Some health systems have reduced physicians’ pay by 20%, but other systems have been putting off any reductions.”

Hospitals and health systems are struggling. “Stopping elective surgeries deeply affected hospitals,” said Ryan Inman, founder of Physician Wealth Services in San Diego. “With fewer elective surgeries, they have much less income coming in. Some big hospitals that are pillars of their community are under great financial stress.”

“Hospitals’ patient volumes have fallen by 50%-90%,” Mr. McWilliams reported. “Lower volume means lower pay for employed physicians, who are paid by straight productivity or other models that require high volumes. However, some health systems have intervened to make sure these physicians get some money.”

Base pay is often safe for now, but quarterly bonuses are on the chopping block. “Employed physicians are often getting a guaranteed salary for a month or two, but no bonuses or extra distributions,” said Joel Greenwald, MD, a financial adviser for physicians in St. Louis Park, Minn., a state mecca for physician employment. “They’ve been told that they will continue to get their base salary but forget about the quarterly bonuses. This amounts to salary reductions of 10%-30%.”

Ensuring payment for these doctors means lowering their productivity benchmarks, but the benchmarks might still be too high for these times. An internist at a large health system in Minneapolis–St. Paul reports that, at a lunch meeting, employed doctors learned that payment benchmarks will be reduced to 70% of their 2019 monthly average.

“I am seeing nowhere near 70% of what I was seeing last year,” he said in an interview, asking that his name not be used. “Given how slow things have been, I am probably closer to 30%, but have not been given any data on this, so I am guessing at this point.”